A recent federal district court case demonstrates the risk to an ERISA fiduciary’s personal assets when he commits a fiduciary breach. The court previously held that the former owner of a privately-held company engaged in a prohibited transaction and breached his fiduciary duties when he sold shares of company stock to his company’s leveraged ESOP at prices in excess of its fair market value. The district court required the owner to provide assets, including several cars, as security in conjunction with his motion to stay enforcement of the judgment pending appeal, stipulating that if the judgment were upheld, the security would be transferred to the plaintiffs. When the U.S. Court of Appeals for the Fifth Circuit upheld the judgment, the owner refused to turn over the assets. The district court is now ordering the owner to turn over the assets despite any hardship that it may cause the owner. Perez… Continue Reading
Safeguards to Defend Against Conflict of Interest Allegations in the Administration of ERISA Welfare Benefit Claims
In cross-motions for summary judgment in Geiger v. Aetna Life Insurance Company, the U.S. Court of Appeals for the Seventh Circuit considered whether Aetna, the designated claims fiduciary and insurer of disability benefits provided under an employer-sponsored ERISA welfare benefit plan, abused its discretion when it terminated the plaintiff’s disability benefits. The plaintiff was a former employee of the employer-plan sponsor. The terms of the plan specifically granted discretionary authority to Aetna with respect to determining benefits and construing the terms of the plan. However, the plaintiff alleged that Aetna had operated under a conflict of interest, as the party that both determined eligibility for and paid plan benefits, and thus abused its discretion in denying her claim. In deciding that Aetna did not abuse its discretion, the Court considered the following four safeguards that Aetna had undertaken to minimize any conflict of interest: (i) Aetna obtained numerous independent physician… Continue Reading
ERISA section 4042(a)(4) provides that the PBGC “may institute proceedings . . . to terminate a plan whenever it determines that the possible long-run loss of the corporation with respect to the plan may reasonably be expected to increase unreasonably if the plan is not terminated.” The PBGC investigates potential candidates for involuntary termination under its early warning program. The PBGC recently issued guidance listing examples of situations that would trigger such an investigation. Some examples relate to corporate transactions (e.g., transferring the plan to a weaker sponsor or controlled group following a controlled group breakup) whereas others relate to the financial deterioration of the plan sponsor (e.g., downgrading of a plan sponsor’s credit ratings or a downward trend in cash flow). View a full list of the early warning triggers.
The U.S. District Court for the Northern District of Texas issued a preliminary nationwide injunction December 31, 2016, blocking HHS from enforcing Section 1557 of the Affordable Care Act in Franciscan Alliance, Inc. et. al. v. Burwell. We previously reported on Section 1557 (which prohibits discrimination in certain healthcare programs and activities for Title IX reasons, e.g., race, color, national origin, sex, age, or disability), the final Section 1557 regulations issued by HHS, and the potential effects on healthcare providers, insurers, and employer-provided health care coverage here. The Franciscan Alliance plaintiffs are three religiously affiliated healthcare providers (later joined by five states) that claimed (i) HHS impermissibly extended Title IX to include gender identity and termination of pregnancy as forms of sex discrimination contrary to Title IX’s history and legislative intent, (ii) Section 1557 requires covered entities to perform and/or provide insurance coverage for abortion and transition-related procedures, and (iii)… Continue Reading
Commencing in 2015, the oil and gas industry began to experience a level of distress unprecedented in recent decades. During this time of distress, as a service to our clients, our business contacts, and the industry as a whole, Haynes and Boone has provided regular updates containing data regarding oil and gas bankruptcy filings. We began this process with our wildly popular Oil Patch Bankruptcy Monitor. Fueled by popular demand, we subsequently commenced publication of our Oilfield Services Bankruptcy Tracker and our Midstream Report. As 2016 draws to a close, in response to the overwhelming feedback from our loyal readers, we now share our Special Year-End Report that includes, not only updates to our Oil Patch Bankruptcy Monitor, Oilfield Services Bankruptcy Tracker, and Midstream Report, but also new data regarding bankruptcy exit strategies successfully employed by oil and gas producers. View the Year-End Edition of the Haynes and Boone Energy… Continue Reading
Haynes and Boone has tracked 114 North American oil and gas producers that have filed for bankruptcy since the beginning of 2015. These bankruptcies, including Chapter 7, Chapter 11, Chapter 15, and Canadian cases, involve approximately $74.2 billion in cumulative secured and unsecured debt. As of December 14, 2016, 70 producers have filed bankruptcy so far this year, representing approximately $56.8 billion in cumulative secured and unsecured debt. During the month of November, 5 E&P companies filed for bankruptcy with cumulative debt of approximately $1.2 billion. So far, in the month of December, 1 E&P company filed for bankruptcy with cumulative debt of $1.4 billion. Texas bankruptcy courts remain at the top of the venue leaderboard, both in terms of the number of E&P filings and cumulative debt. Fifty one E&P bankruptcies have been filed in Texas, representing approximately $32.5 billion in cumulative secured and unsecured debt. View the Haynes and… Continue Reading
As a companion to our analysis of E&P and oil field service bankruptcy filings, Haynes and Boone has reviewed and compiled this Midstream Report. As demonstrated by the Midstream Report, the midstream sector has not suffered the same level of distress experienced by E&P or oilfield service companies. As of December 14, 2016, 16 midstream companies have filed Chapter 11 bankruptcy in the United States since 2015. These bankruptcies involved approximately $17.2 billion in cumulative secured and unsecured debt (including debt of related affiliates). View the Haynes and Boone Midstream Report here.
As a service to energy industry participants, the lawyers of the Oilfield Services and Bankruptcy Practices at Haynes and Boone, LLP have been tracking and reporting industry developments in oilfield service restructurings. Our research includes details on 110 bankruptcies filed since the beginning of 2015, including secured and unsecured debt totals for each case. The total amount of aggregate debt administered in oilfield services bankruptcy cases in 2015- 2016 is approximately $18.8 billion and the average debt of these cases exceeds $170 million. View the Haynes and Boone Oilfield Services Bankruptcy Tracker here.
On December 28, 2016, the DOL released Interpretive Bulletin 2016-01 (the “Bulletin“), which provides updated guidance for ERISA plan fiduciaries with respect to the voting of proxies on individual securities held in employee benefit plan portfolios and the appropriateness of active engagement with corporate management by plan fiduciaries. In publishing the Bulletin, the DOL withdrew Interpretive Bulletin 2008-2 and generally reinstated the language of Interpretive Bulletin 94-2, with certain clarifications. The DOL was concerned that Interpretive Bulletin 2008-2 had been misunderstood in a manner that dissuaded plan fiduciaries from voting proxies and otherwise prudently exercising shareholders’ rights, particularly with respect to areas concerning environmental, social, and governance issues and active engagement with corporate management. View the Bulletin here. View a news release related to the Bulletin here.
The Puerto Rico Department of the Treasury recently issued Tax Policy Circular Letter No. 16-07 (the “Circular“), which announced applicable qualified retirement plan limits for 2017, as required by the Puerto Rico Internal Revenue Code of 2011 (the “PR Code“). For plans qualified in Puerto Rico and for those plans dual qualified in the United States and Puerto Rico, only the limits on annual benefits, annual contributions, and plan compensation have changed for 2017. The applicable plan limits are as follows: Annual Benefit Limit (All Defined Benefit Plans): $215,000 (increased from $210,000 for 2016). Annual Contribution Limit (All Defined Contribution Plans): $54,000 (increased from $53,000 for 2016). Annual Compensation Limit (All Plans): $270,000 (increased from $265,000 for 2016). Compensation Limit for a Highly Compensated Employee: $120,000 (unchanged). Elective Deferrals Limit (Dual Qualified Plans or Federal Government Thrift Plans): $18,000 (unchanged). Elective Deferrals Limit (Puerto Rico-Only Plans): $15,000 (unchanged). Catch-up Contribution… Continue Reading